China’s Ganfeng Lithium plans to build derivatives desk

Battery materials giant Ganfeng Lithium Group Co. announced potential plans to establish a derivatives-trading desk, signaling the industry’s growing need to manage risk after a period of intense volatility and geopolitical tensions.

In a statement released on Monday, the Chinese company said the derivatives desk will aim to mitigate risks associated with cross-border investments and bolster financial stability.

The trading desk, will primarily deal with equities, indexes, commodities, and interest rates. Details on staffing and location were not disclosed.

The global lithium market has experienced significant volatility in recent years. A surge in new supply combined with concerns regarding demand growth led to a boom-and-bust cycle for the crucial battery material.

Additionally, producers like Ganfeng and its competitors have faced challenges due to geopolitical shifts and evolving regulations as governments work to secure access to lithium resources.

Ganfeng’s Hong Kong share price has been volatile, hitting a high of HK$132 in 2021 before dropping to HK$17.10. The company reported a loss in the first half of 2024, aligning with increased bearish bets on its shares last Friday.

While Ganfeng is based in China, it has also established a presence in Argentina, Australia, Mali, and Mexico. Recently, the company initiated international arbitration against Mexico after the country terminated a proposed $1 billion lithium project.

While lithium futures remain a nascent market, liquidity is gradually improving on the Guangzhou Futures Exchange following the launch of a carbonate contract in 2023.

In a separate announcement on Monday, Ganfeng revealed plans to issue five-year overseas bonds worth up to $200 million to support a project in Argentina.

Attribution: Bloomberg